So you know... what we know... when we know it

How do you spend your money? It’s a deeply personal question – in a world of limited resources, what you choose to buy or forgo is often a reflection of what you value, how much you value it, and where you want to see yourself in the future. This principle holds true in Washington D.C. as well. When policymakers come out with budget proposals, it reflects their values and priorities for the nation, and their vision for the future. So in June, when the House Budget Committee passed a Budget Resolution to cut $6.5 trillion over 10 years, with significant cuts to important supports for families trying to make ends meet, policymakers gave their constituents a preview of what they value and where they see the nation in the future.

Budget Resolutions are intended to create a blueprint for federal government spending and revenue over a particular time period. While Budget Resolutions are not binding decisions, they can set the stage for significant changes in tax or spending laws.

The recently proposed House Budget Resolution would pay for those tax cuts through reductions to important programs that make it possible for people to have food on the table or go to the doctor. The proposal includes:

$2.1 trillion over 10 years in cuts to health care that will harm people who see doctors through Medicaid, individuals who buy health insurance on the individual market, seniors who rely on Medicare, and folks with pre-existing conditions;

$17 billion over 10 years in cuts through the elimination of the Social Services Block Grant that funds child and adult care services, home-delivered meals, employment supports, and adoption services;

$923 billion over 10 years in cuts to income security programs including food assistance that helps keep nutritious food on the table for kids, parents, seniors, and others who can’t afford basic necessities; and cash assistance that helps people buy diapers or fill up their tank with gas so they can make it to work; and

An expansion of paperwork requirements in food assistance, cash assistance, and Medicaid, making it harder for folks to get food, stay healthy, and afford the basics.

Our communities are stronger and more prosperous when we and our neighbors are succeeding. Investments that provide breakfast for growing kids and doctors’ visits for people fighting cancer matter to all of us. But the vision put forward in the Budget Resolution creates a false choice between supporting our friends and neighbors when they hit a rough patch and protecting our economy. Let’s not fall into that trap. Let’s instead make the choice to invest in our communities so that everyone has a chance to succeed.

The recently released July Revenue and Economic Update gave us mixed news about the state’s economic and budget landscape. The quarterly report from Minnesota Management and Budget (MMB) showed that the state revenues for the past fiscal year have come in on track. It also reports that the national economy is expected to grow in the near term, but then that growth will taper off over the next few years.

Some of the top takeaways from the Update include:

1. State revenues are coming in above projections. A preliminary look at the state’s revenues for FY 2018, which ended on June 30, shows they came in $348 million above projections; that’s 1.6 percent more than projected in the state’s February 2018 Economic Forecast. The increase is primarily due to higher income taxes received. A complete picture of FY 2018 revenues will be in the October update.

2. Long-term economic growth is expected to be lower. The national economic forecasters predict stronger national GDP growth for 2018, from the 2.7 percent predicted in February to 3.0 percent in the July update. In 2019, growth is projected to be the same as anticipated in February at 2.7 percent. However, growth is then expected to slow to 1.4 percent by 2021. This change in projected future economic growth is due to several factors, including the fading impact of stimulus from the federal tax bill passed last year, and the effects of the new tariffs between the U.S. and China.

3. National unemployment rate expected to remain low. Nationally, unemployment was 4.0 percent in June, and is expected to drop to 3.4 percent in 2019. Job growth has been steady, with the economy adding around 200,000 jobs per month this year.

4. Forecasters are fairly confident in their projections. The forecasters assign a 65 percent chance that their baseline forecast is correct. They also give a 20 percent chance for a more pessimistic scenario in which there’s a short recession next year, and assign a 15 percent probability to a more optimistic scenario.

Next legislative session, policymakers will need to put together the state’s next two-year budget. After the conclusion of this past legislative session, we estimated that we could expect a surplus of about a $300 million for the next biennium. The increased revenues in this week’s economic update suggest that number could get larger by the time the next full economic forecast comes out this winter. However, there’s some data in this report that causes us concern; the lower economic growth in the longer term could substantially dampen future revenues.

The next quarterly update will be in October, right before the state’s November Budget and Economic Forecast, which will give us an updated picture of what resources will be available as policymakers and the public engage in next year’s budget debate.

The 2018 Legislative Session opened with some major tasks on policymakers’ to-do lists. By tradition, this was a year when policymakers normally put together a capital investment package, commonly called the “bonding bill”, that invests in infrastructure projects across the state. More unexpectedly, the December 2017 passage of the federal tax overhaul raised substantial questions on how to update the state’s tax code in accordance with Minnesota values of fairness and fiscal responsibility. And a projected $329 million surplus created opportunity to make state investments this year, in addition to those made in the two-year state budget passed last year.

However, when the three months of the legislative session came to an end, the Legislature and Governor Mark Dayton reached agreement on only one of the three major items. A bonding bill was passed, authorizing $1.6 billion in projects including transportation, higher education infrastructure, water quality, and affordable housing. But intense disagreement in priorities between Dayton and the Legislature resulted in no final agreement on either budget or tax issues.

The contrasting priorities between policymakers are seen in how they would use the projected budget surplus. The Legislature allocated more than half of the surplus to tax cuts and additional transportation spending, while the governor proposed putting the largest portion of the surplus to education. The Legislature’s final offers to Dayton were contained in a nearly 1,000-page supplemental budget bill and in a tax bill, both of which the governor vetoed.

We often look at state policy decisions through the lens of whether they build broader prosperity and improve the lives of Minnesotans across the state. By this measure, the outcomes of the 2018 Legislative Session are a mixed bag. Important opportunities to support Minnesotans striving toward economic security were lost. At the same time, harmful proposals that would have put up new roadblocks were stopped. Below are some examples that represent both the opportunities lost and harm prevented to Minnesotans’ ability to get by and get ahead.

Health care: Among the harmful proposals stopped was one to erect new reporting requirements, which would likely result in more than 20,000 Minnesotans who participate in Medicaid losing their health care. But a major lost opportunity was that the Legislature failed to take action to maintain the provider tax, an important funding source for affordable health care for about 90,000 Minnesotans that otherwise will expire in 2020. With this deadline looming, this will be a critical issue for policymakers to address next year. (Additional coverage of health and human services issues are covered in another blog post.)

Family economic security: A disappointing lost opportunity was that family-friendly improvements to the state’s Child Care Assistance Program supported by both the Legislature and Dayton will not be implemented this year. These proposals would have helped families maintain their child care even as they faced various changes and challenges, and would have increased funding for child care providers. This is another issue the state will need to pick up next year: Minnesota is out of compliance with federal standards and may face a financial penalty. Another harmful proposal prevented by the governor’s veto was a redundant verification system that would have erected new barriers to struggling Minnesotans accessing health care, child care, or food assistance.

Wage standards: A positive for working people is that a proposal to penalize certain tipped workers by freezing their minimum wages, which had been included in earlier bills, was not included in the final supplemental budget that the Legislature sent to the governor.

Transportation: There is broad agreement on the need to invest in the state’s transportation system, but fierce disagreement about which modes of transportation and how to fund them. Road and bridge projects make up a significant part of the bonding bill, but those Minnesotans who rely on transit to get around were largely left out. The Legislature’s proposed constitutional amendment to increase funding for transportation passed the House but did not make it through the Senate. This amendment, if approved by the voters, would have diverted funding that currently is available for other priorities like education, higher education, and economic development.

Education: While legislators proposed additional funding for Minnesota’s schools, their overall education investments were far below what the governor proposed. Dayton proposed investing $169 million in K-12 Education, including $138 million in one-time emergency funding to fill budget deficits for schools throughout the state through an increase to the basic student formula, as well as funding for pre-kindergarten and special education. The Legislature proposed $28 million in their education budget, primarily for school safety, and $50 million in one-time school funding in their final tax bill. Because of the lack of a final agreement on the budget or tax bills, the only additional education funding enacted this year was some school safety funding in the bonding bill.

Taxes: If the state acted to simply conform to federal tax changes, Minnesotans – including families with children, seniors, and people with disabilities – could have seen tax increases. By the end of session, it appeared policymakers had agreed on an approach to updating the income tax for individuals and families that would have prevented these increases. But there was strong disagreement about what kinds of tax cuts to enact and who would benefit from them. The Legislature’s tax bill would have raised taxes on the most struggling Minnesotans over time, which would help pay for tax cuts that benefit others who were better off. Dayton’s tax plan made working people and their families the priority for tax cuts, for example, through a proposed expansion of the Working Family Credit. Updating the tax code will be another issue policymakers will need to tackle next year. In the meantime, many Minnesota individuals and families will see the amount of income taxes they pay basically unchanged, but the process for filing will be more complicated. But by vetoing the Legislature’s tax bill, Dayton prevented changes that would have made the tax system less fair and would have undermined funding that supports our schools, nursing homes, public safety, and other essential community services.

Infrastructure: The bonding bill invests in things like transportation, higher education infrastructure, and water quality. Importantly, it includes $90 million in bonds for affordable housing, and a vital $28 million for mental health crisis centers, which provide emergency shelter for people with behavioral health needs. The bonding bill also includes $25 million for school safety; unfortunately, some of those dollars come out of the state’s budget reserve, weakening the state’s “rainy day fund” that Minnesotans count on during economic downturns or other budget shocks.

Policymakers will have the opportunity once again next year to invest in Minnesotans as they put together the state’s next two year budget, and another crack at many of the issues they wrestled with this session. Under current economic and budget projections, Minnesota will have roughly about a $300 million projected surplus at the start of the next biennium. We’ll be advocating for wise investments in a broader prosperity that reaches all Minnesotans.

May 20th marked the closing of the 2018 Legislative Session, which was capped off with Governor Mark Dayton vetoing the Supplemental Budget Omnibus Bill (Senate File 3656) just three days later. This veto means that important changes to support affordable child care will not become law; however, it also means that harmful provisions to add more barriers to affordable health care, child care, and food assistance will also remain on the cutting room floor.

Policymakers set the state’s two-year budget in 2017. This year, lawmakers had the ability to adjust that budget and determine what to do with a modest surplus. Ultimately, the Legislature passed a wide-ranging budget and policy package that spanned more than 980 pages, and addressed issues from traffic violations to health care requirements.

Positive provisions in the Supplemental Budget Omnibus Bill included important family-friendly changes to Minnesota’s Child Care Assistance Program. These changes would have been paid for by new federal funding, and supported families experiencing homelessness; allowed families to retain their child care assistance as they made the transition off Minnesota’s welfare-to-work program; helped families who move between counties keep their child care assistance; and increased the reimbursement rate child care providers receive for their important services.

The bill also included provisions that addressed a pending 7 percent rate cut for some providers who care for people with disabilities; some investments to address the opioid crisis; an increase in chemical dependency provider rates intended to expand access to substance abuse treatment; and some language seeking to address abuse against vulnerable adults living in long-term care settings.

However, the bill also contained language that would have added unnecessary barriers to health care, child care, and food assistance. This bill would have required the Department of Human Services to hire a third-party vendor to double-check the eligibility of Minnesotans who have already been determined to be eligible by the state. People seeking these basic supports often experience unstable housing, juggle multiple jobs, or have unreliable transportation — all things that make it harder for vendors to get in touch with them to confirm, for the second time, that they are eligible for these essential supports.

The bill failed to repeal the sunset of the provider tax, putting health care for about 89,000 Minnesotans at risk because the state will lose more than $900 million in the FY 2020-21 biennium. The provider tax amounts to more than half of the Health Care Access Fund’s revenue, which supports affordable health care.

The governor cited both process and policy objections to the Supplemental Budget Omnibus Bill in his veto letter. According to the Dayton, these objections, including the failure to meaningfully address the abuse of vulnerable adults and the opioid epidemic, outweighed the bill’s positive provisions on issues such as school safety and child care.

Another positive outcome of the session is that the state did not enact new documentation requirements that likely would have resulted in taking health care away from over 20,000 Minnesotans. At the beginning of session, the House and Senate quickly moved proposals to require people who use Medical Assistance, Minnesota’s version of Medicaid, to submit paperwork showing how much they work, or documentation from a doctor on why they can’t work, in order to continue to receive health care. Sorting through the piles of paperwork that would have been required by this proposal was estimated to cost Minnesota counties more than $160 million every year once fully implemented.

Policymakers will have a second bite at the apple on these issues. The 2019 Legislative Session will be focused on setting the next two-year budget. Be on the lookout for continuing conversations to either create new barriers aimed at limiting essential supports, or to invest in strategies that expand Minnesota’s economic opportunities.

Employers who hire refugees see lower turnover and choose from a wider pool of potential employees. That’s what a new report from the Fiscal Policy Institute and the Tent Partnership for Refugees finds. This finding is especially relevant for a state like Minnesota with both a tightening labor market and a history of welcoming refugees. Some 18,800 refugees have been placed here in Minnesota over the past 10 years, most to the Minneapolis-St. Paul metro area.

The new report is based on over 100 interviews of employers of refugees, refugees, resettlement staff, and others around the country, as well as existing data sources like the U.S. Census’s American Community Survey. Here are some of the findings:

Nearly three-quarters of the firms surveyed saw lower turnover rates among their employees who were refugees than for their company overall, and these lower turnover rates were present across industries. For example, in manufacturing, average annual refugee turnover was 4 percent, compared to 11 percent overall.

Lower turnover was good for companies. The report notes that the cost to replace an employee was about one-fifth of that worker’s salary. That’s more than $5,000 for the typical worker covered by the report’s surveys. The savings from lower turnover can be invested instead in the business.

Employers often saw overall improvements in their workplace after refugees were hired. For example, making hiring choices with the expectation of doing some on-the-job training opened opportunities to more refugee and non-refugee candidates. Similarly, making instructions clearer to workers who don’t speak English well was also helpful for native English speakers.

Refugees are important members of our communities and our economy. This report is a good reminder that refugees come to this country fleeing dangerous circumstances, and settle in and make important contributions to our workforce.

Earlier this spring, a proposed new federal rule was released that would make it harder for New Americans to thrive and to fully contribute to our communities and our economy.

This rule goes against our country’s basic values. Our government has held that certain supports, such as those that improve health, should be available to everyone who needs them. The rule also ignores how New Americans are contributing to our communities, as our neighbors who work, pay taxes, and learn alongside us. And this proposal would make it even harder for New Americans on their path to citizenship, and folks moving to the country trying to find new opportunities.

Currently, when people apply to move to the United States or apply to adjust their immigration status, like applying for a green card, the government determines whether that person has “public charge” status. This status is based on a number of factors, including age, health, family status, financial status, and skills, but also includes use or potential use of public supports. Currently only two types of supports are counted to determine “public charge” status: cash assistance (like Temporary Assistance for Needy Families, or TANF) and use of long-term care facilities. Having “public charge” status can make individuals ineligible to come to the United States or ineligible for lawful permanent resident status.

The new proposed rule would put many New Americans in an untenable position knowing they could harm their goals of getting a green card if they access basic supports that help them and their families to make ends meet. It would drastically expand what the government considers to make a “public charge” determination. The draft rule proposes adding supports like the Children’s Health Insurance Program (CHIP), Women, Infants, and Children nutritional assistance (WIC), and the Earned Income Tax Credit (EITC). In addition, it would take into account whether U.S. citizen children use these supports.

This proposal would likely create confusion around who can access basic supports that many of us turn to in times of need. Those harmed include the New Americans who are unsure whether they can still qualify for basic services, like food and housing assistance, as well as many children who might not get the supports they need to remain healthy and succeed in school.

This proposed rule is a mistake. New Americans are vital contributors to our communities, and they should be able to receive basic supports so that they can thrive and build our economy. The draft rule is expected to be included in the Federal Register by July. You will have an opportunity to have your concerns heard and comment on this proposal. Stay tuned.

Last week, we evaluated the Legislature’s tax bill and found that it needed improvement. Unfortunately, very little was changed, and the tax bill the Minnesota Legislature passed Sunday contains the same unfair and unsustainable provisions as the version that Governor Mark Dayton vetoed on May 17.

The big tax challenge this year was to respond to the federal tax bill without repeating its mistakes. As the end of session neared, there appeared to be agreement on how to approach the individual income tax: Minnesota would update our tax code in ways that protected Minnesotans – including families with children, seniors, and people with disabilities – from the tax increases they would see if Minnesota simply conformed to federal tax changes. That consensus is included in the new tax bill, House File 947.

But House File 947 includes other provisions that undo some of the good done by that agreed-upon approach to conformity. Plus, the bill’s tax cuts leave out the Minnesotans who are struggling the most to get by, and it is not fiscally sustainable.

Minnesotans would see tax increases over time under this bill because it would switch to “chained CPI”, a slower-growing measure, to make yearly inflation adjustments across the tax code. As a result, the standard deduction, family exemptions, the Working Family Tax Credit, the Child and Dependent Care Tax Credit, and other tax benefits would be worth less over time. Minnesotans would only be protected from tax increases from conformity decisions temporarily. Minnesotans would pay $60 million more in the FY 2020-21 budget cycle from the change to chained CPI, and its impact will grow larger each additional year.

Those Minnesotans who struggle most to make ends meet will pay more over time, but will not benefit from the bill’s tax cuts. That’s because an estimated 1 in 5 Minnesota households don’t benefit from the bill’s income tax rate reductions because they don’t have enough taxable income after subtracting their deductions and exemptions. And to get the maximum amount of tax cut, a family of four would need to earn about $180,000, which puts them in the highest-earning 10 percent of Minnesota households.

The bill would cut Minnesota’s corporate tax rate by 0.7 percentage points, on top of the 40 percent rate cut corporations received in the federal tax bill. Both the income and corporate tax rate reductions “phase in” over time, which means they take several years to fully take effect, masking their ultimate cost. In addition, the bill would create additional future problems by using some temporary revenue increases – such as provisions related to “deemed repatriation” that end after eight years – to help pay for permanent tax cuts.

Mostly what’s different about House File 947 are its components related to the funding challenges many Minnesota school districts are facing. Unfortunately, the only additional money for schools in the bill is $50 million that comes out of the state’s budget reserve. This “rainy day fund” is where the state sets dollars aside so that in the next economic downturn, Minnesotans can still count on essential services. In good times, states should build their reserve funds, and despite good progress over the past number of years, Minnesota’s reserve isn’t yet at the recommended target. The budget reserve shouldn’t be tapped into whenever a short-term need comes along. It’s worth remembering the kinds of financial and other pressures Minnesota families, seniors, and children faced during past recessions when the state had inadequate budget reserves.

The bill has other short-comings as well. The lack of any expansion of the Working Family Credit is one. But I suspect if Dayton vetoes this bill, as he has suggested, it will be because of what is in the bill, not only what’s missing.

As we finish up the last week of the state’s legislative session, the Legislature has passed their initial budget and tax bills, and now need to reach compromise agreements with Governor Mark Dayton.

In February, the state’s economic forecast projected a positive balance of $329 million for the current FY 2018-19 biennium. That provides some opportunity to make additions to the two-year state budget passed last year. In addition, a major pressing issue for policymakers this session is how to respond to the federal tax bill.

As policymakers move into final negotiations, they have taken different approaches. The governor allocates about half of the surplus to education, while the House and Senate make taxes their biggest priority.

Proposed General Fund Changes (FY 2018-19)

Governor

Senate

House

Conference

Education

$164 million

$20 million

$30 million

$28 million

Higher Education

$30 million

$1 million

$5 million

$3 million

Health and Human Services

-$40 million

$23 million

$10 million

$18 million

Environment

$3 million

$0

$750,000

$0

Agriculture

$200,000

$0

$250,000

$0

Public Safety

$23 million

$8 million

$7 million

$10 million

Transportation

$36 million

$14 million

$101 million

$58 million

Jobs and Energy

$34 million

$15 million

$15 million

$15 million

State Government

$34 million

-$17,000

-$7 million

$0

Capital Investment

$27 million

$0

$14 million

Taxes

-$12 million

$171 million

$107 million

$140 million

Other Bills

$27 million

$28 million

$46 million

$27 million

Net Changes

$327 million

$280 million

$329 million

*A conference target for Capital Investment has not been released.

The governor introduced his proposed budget in March, in which his largest new investments were focused on education. He includes funding for safe schools and special education, as well as expanded access to pre-kindergarten. He more recently proposed emergency funding for schools through an increase the basic student formula. Dayton’s budget also includes investments in health and human services, including provisions to protect families from disruption in their child care, and maintains an essential funding source for affordable health care – the provider tax. Dayton also includes investments in other areas of the budget, like additional funding to expand access to broadband for thousands of Minnesotans.

The Legislature’s tax plan shares some important components with Governor Dayton’s tax plan – both would maintain parts of the tax code that protect families with children, seniors, and people with disabilities from state tax increases as a result of conformity. But they have important differences in how additional tax cuts are distributed. The Legislature proposes income tax cuts that leave out an estimated 1 in 5 Minnesotans, and provide the largest tax cuts to those with higher incomes. Dayton’s tax plan takes a more across-the-board approach, through a $60 per person tax credit and expanding the Working Family Credit, so families struggling to get by are included.The 2017 federal tax bill creates complexity and challenges for states, and a top issue in this session has been how to respond. While the federal legislation provides the largest tax cuts to profitable corporations and high-income individuals while adding to the nation’s debt, Minnesota can instead put everyday Minnesota families first while protecting the resources needed to fund essential services.

The Legislative tax plan is $140 million in the current biennium – over 40 percent of the projected FY 2018-19 surplus. Also concerning is that it contains cuts in income and corporate taxes that grow over time, but relies on some temporary funding sources to pay for these ongoing tax cuts.

The House also includes a large general fund target for Transportation, three-fourths of the proposed $101 million would be transferred to a fund that supports the state’s highways. The conference agreement of $58 million follows this value and overwhelmingly goes to roads and bridges and the state’s computer system for vehicle license plates (MNLARS).

Both the House and Senate make some investments like funding for safer schools and increased access to broadband in Greater Minnesota, but their investments often don’t go far enough to meet the needs of Minnesotans. For example, as we discuss in another blog, the House and Senate budgets make some important policy changes to make child care more accessible, but additional investment is needed to fully address the fact that 2,000 families are on a waiting list for child care.

Legislators and the governor are now in negotiations to reach agreement on tax and budget decisions for this session. We continue to urge policymakers to include a tax response that prioritizes those Minnesotans who were left behind in the federal tax bill and make targeted investments to support Minnesota families and communities.

I’ll admit it – I was hoping for a relatively quiet 2018 Legislative Session in terms of tax policy. Then in December 2017, the federal government passed a wide-ranging tax bill that included large, permanent tax reductions for corporations, and a complex set of changes in the individual income tax. Because of the many ways that Minnesota’s tax laws connect with federal law, that put a big job in front of state policymakers.

Federal conformity done poorly could raise state taxes on families with children in order to pay for tax cuts for others – that’s how it turned out in states such as Idaho and Utah. We’ve called for fiscal responsibility – recognizing that some of the potential additional revenues from conformity are temporary, and that it would be unwise to substantially undermine the state’s ability to raise revenues for education, health care, safe and thriving communities, and other public investments that Minnesotans expect. Minnesota is going to need those revenues if federal policymakers follow through with their proposals to dramatically reduce funding to the states, and whenever the next economic downturn inevitably arrives.

The Legislature’s tax bill (House File 4385) makes some important progress in meeting these goals, but falls seriously short in other respects. In particular, its tax cuts are unsustainable and leave out too many ordinary Minnesotans. These are some of the reasons that Governor Mark Dayton vetoed the bill this morning.

Fortunately, both the legislative tax plan and the governor’s proposal would maintain the value of these exemptions and refunds, at least initially. There’s also agreement to maintain the standard deduction, and allow Minnesotans to continue to take most itemized deductions that were available to them before the federal law’s changes.

All this adds up to most Minnesotans having about the same amount of income subject to state income taxes as they had before the federal law passed, instead of a patchwork of some paying more and some paying less.

However, the Legislature’s tax plan only temporarily protects Minnesotans from conformity-related tax increases. The Legislature would adopt a slower-growing measure called “chained CPI” to adjust the tax code for inflation. Deductions and exemptions, as well as the Working Family Credit, the Child and Dependent Care Credit, and other tax benefits, would be worth less compared to current law. The Department of Revenue estimates this change would raise Minnesotans’ taxes by $60 million in the next two-year budget cycle. Modest-income Minnesotans would pay more to help pay for tax cuts that provide little to no benefit to them.

One of the biggest points of contrast between the Legislature’s and the governor’s plans is how and to whom they would provide additional tax cuts.

In terms of individuals and families, the Legislature’s tax bill leaves out many Minnesotans and provides larger tax cuts to those with higher incomes. It would cut income tax rates in a couple of steps, ultimately lowering the tax rate by 0.1 percentage points in the first bracket, and by 0.2 percentage points in the second bracket. But an estimated 1 in 5 Minnesota taxpayers don’t have enough taxable income – after subtracting their deductions and exemptions – to see any benefit from these rate cuts. In contrast, a family of four earning about $180,000 or more would get the maximum tax cut – that’s an income that puts them in the highest-earning 10 percent of Minnesota households.

Dayton’s proposal provides its tax cuts more evenly. It would create a new $60 per person Personal and Dependent Tax Credit for individuals with incomes up to $140,000, and married filers with incomes up to $280,000. Unlike the Legislature, he ensures that Minnesota’s most struggling workers and their families are included in the tax cuts by expanding the Working Family Credit. The governor’s Working Family Credit expansion would benefit 329,000 Minnesota workers and families, who would see an average $160 tax benefit.

The legislative tax plan also cuts Minnesota’s corporate tax rate, on top of the 40 percent rate cut corporations received in the federal tax bill. It would cut the corporate tax rate by 0.7 percentage points by year 2020, and eliminate the corporate AMT, as well as reduce business taxes through other provisions. In the near term, these tax cuts are paid for through conformity provisions that raise business taxes. But these cuts are unsustainable, as they grow larger over time, and rely on temporary revenues to pay for permanent tax cuts.

The Department of Revenue calculates the cost of the income and corporate tax rate reductions to reach $570 million in FY 2022-23.

Other issues that are sure to be part of the negotiations between the Legislature and governor include Dayton’s proposal to reverse three tax cuts in the 2017 tax bill that grow over time (regarding the estate tax, tobacco taxes, and the statewide property tax paid by businesses) and provisions in the Legislature’s tax bill that preempt local governments’ decision-making authority.

There are only five days left in the legislative session. That’s not much time to reach agreement, but it is possible to put together a fair and sustainable tax plan that updates the tax code in ways reflecting Minnesota values, if there is the will to do so.

Minnesota has the opportunity to learn from its mistakes. Currently, Minnesota’s Legislature is considering new documentation requirements in Medical Assistance, Minnesota’s Medicaid program. The reality is we know how this turns out: many Minnesotans will likely lose health care and struggle to stay healthy enough to work.

This isn’t the first time Minnesota has required extra documentation to receive basic supports. In 2013, Minnesota implemented a documentation requirement rule in its Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. This rule required that single adults without dependents demonstrate they work 20 hours each week, participate in job training, or work at an unpaid job for the government in order to receive assistance to buy nutritious food through SNAP. The SNAP rule has exemptions for people with a serious illness or disability.

Unfortunately, nearly 47,000 Minnesotans lost their food assistance within one year of starting the SNAP reporting requirements. In 2017, only 6,000 adults without children were able to buy nutritious food through SNAP under this rule, likely because so many people faced significant barriers to work or paperwork glitches that prevented them from using SNAP.

The people who are denied assistance to put healthy food on their table because of this rule face many barriers to getting and keeping a job. They include Minnesotans experiencing homelessness, struggling with addictions, dealing with the aftermath of intense trauma and PTSD; experiencing literacy challenges; or lacking reliable transportation. All of the people who lost food stamps made less than $19,000 a year, and half of them had no income at all because of the significant barriers to employment they experience.

Minnesotans also lost food assistance because of problematic paperwork glitches. Some Minnesotans who should have been exempted still lost food assistance because counties were unable to process exemptions due to a lack of resources. Counties had thousands of mailed notices returned to them, meaning many Minnesotans lost assistance because they never even knew there was more paperwork to complete.

The reporting requirement proposal in Medical Assistance has a complex exemption system that Minnesota’s 87 counties would have to implement at great expense. In fact, a recent analysis by Minnesota Management and Budget indicates that counties will have to spend $284 million just in the first two years of implementation in order to handle the volume of new paperwork this rule would require. Failure to adequately fund these costs will likely result in people needlessly losing their health care. There is also no funding for employment and training services.

We can expect similar results from the proposed changes in Medical Assistance: fewer Minnesotans able to get basic necessities for survival. Last time it was food; this time it’s the ability to see a doctor or fill a prescription. Creating more barriers to health care is the wrong choice for Minnesota.

-Sarah Orange with special thanks to Jessica Webster from Mid-Minnesota Legal Aid Legal Services Advocacy Project for compiling the data and tirelessly advocating for Minnesotans who buy nutritious food through SNAP